The government of Pakistan has created a new price stabilization fund for petroleum products, seeking to build a financial buffer that can be used to soften future fuel price shocks after recent volatility triggered by conflict in the Middle East.
The finance ministry on Monday notified a new head of account for the Petroleum Prices Stabilization Fund following a federal cabinet decision on June 5, according to an official notification.
Under the arrangement, all proceeds received in the name of the fund will be credited to the federation’s public account under the major head of Special Deposit Fund. The finance ministry said detailed operating procedures for the fund would be worked out by the finance division, petroleum division and the Oil and Gas Regulatory Authority, with separate approvals to be obtained as required.
The move comes after sharp swings in international oil prices in recent months, including increases linked to the US-Israel war on Iran, highlighted the government’s lack of a formal mechanism to manage temporary supply gains or price relief.
The fund does not yet hold any deposits. But the government wants a legal and financial structure in place so that any future gains from discounted oil purchases, special import arrangements or budgetary savings can be redirected to support domestic fuel price adjustments.
In previous months, some cargoes were secured directly by the government through diplomatic channels at lower prices than those typically available through standard industry procurement. Those savings, however, were managed on an ad hoc basis through administrative powers rather than under a permanent framework.
Officials say the new fund is intended to capture such windfalls in the future and use them, fully or partly, to reduce the impact of weekly petroleum price revisions on consumers.
Potential funding sources could include resources accumulated in coming months, savings generated through austerity measures, and limited support from special provincial grants to the federal government. The scope for broader financial manoeuvring remains constrained under Pakistan’s programme commitments with the International Monetary Fund, the officials said.
The fund could also be used when Pakistan sources oil from non-traditional suppliers such as the US, Russia or Iran, or when specialized storage arrangements create cost advantages over regular imports from the Middle East.
